EXHIBIT 99.3
Summary Pro Forma Combined
Oil, Natural Gas and Natural Gas Liquids
Reserve Data
The following tables set forth summary pro forma information with respect to Vanguard's, Encore's, Parker Creek’s and the Permian Basin Acquisition’s pro forma combined estimated net proved and proved developed oil, natural gas and natural gas liquids reserves as of December 31, 2010. This pro forma information gives effect to the Encore, Parker Creek and Permian Basin acquisitions as if they had occurred on January 1, 2010. Future exploration, exploitation and development expenditures, as well as future commodity prices and service costs, will affect the reserve volumes attributable to the acquired properties and the standardized measure of discounted future net cash flows.
Estimated quantities of oil, natural gas and natural gas liquids reserves as of December 31, 2010
| | | Gas (MMcf) | |
| | | Vanguard historical (a) | | | Encore historical | | | Parker Creek Acquisition | | | Permian Basin Acquisition | | | Proforma Adjustments | | | Vanguard pro forma combined (b) | |
| Net proved reserves | | | | | | | | | | | | | | | | | | |
| January 1, 2010 | | | 83,149 | | | | 84,699 | | | | 1,385 | | | | 26,434 | | | | – | | | | 195,667 | |
| Revisions of previous estimates | | | (7 | ) | | | (4,484 | ) | | | – | | | | 5,583 | | | | – | | | | 1,092 | |
| Extensions, discoveries and other | | | 76 | | | | – | | | | – | | | | – | | | | – | | | | 76 | |
| Purchases of reserves in place | | | 75,715 | | | | 148 | | | | – | | | | – | | | | (75,384 | ) | | | 479 | |
| Production | | | (4,990 | ) | | | (5,836 | ) | | | (528 | ) | | | (1,593 | ) | | | | | | | (12,947 | ) |
| December 31, 2010 | | | 153,943 | | | | 74,527 | | | | 857 | | | | 30,424 | | | | (75,384 | ) | | | 184,367 | |
| | | Oil and Natural Gas Liquids (MBls) | |
| | | Vanguard historical (a) | | | Encore historical | | | Parker Creek Acquisition | | | Permian Basin Acquisition | | | Proforma Adjustments | | | Vanguard pro forma combined (b) | |
| Net proved reserves | | | | | | | | | | | | | | | | | | |
| January 1, 2010 | | | 9,963 | | | | 28,930 | | | | 5,216 | | | | 1,473 | | | | – | | | | 45,582 | |
| Revisions of previous estimates | | | 1,290 | | | | 1,940 | | | | – | | | | 286 | | | | – | | | | 3,516 | |
| Extensions, discoveries and other | | | 17 | | | | – | | | | – | | | | – | | | | – | | | | 17 | |
| Purchases of reserves in place | | | 33,251 | | | | 10 | | | | – | | | | – | | | | (32,846 | ) | | | 415 | |
| Production | | | (892 | ) | | | (2,227 | ) | | | (1,023 | ) | | | (73 | ) | | | – | | | | (4,215 | ) |
| December 31, 2010 | | | 43,629 | | | | 28,653 | | | | 4,193 | | | | 1,686 | | | | (32,846 | ) | | | 45,315 | |
(a) Includes the non-controlling interest in the Encore reserves of approximately 53.3% at December 31, 2010.
(b) Includes Vanguard's, Encore's, Parker Creek’s and the Permian Basin Acquisition’s estimated net proved and proved developed oil, natural gas and natural gas liquids reserves as of December 31, 2010.
| | | Vanguard historical (a) | | | Permian Basin Acquisition | | | Vanguard pro forma combined (b) | |
| Estimated proved reserves: | | | | | | | | | |
| Natural Gas (MMcf) | | | 153,943 | | | | 30,424 | | | | 184,367 | |
| Oil and Natural Gas Liquids (MBbls) | | | 43,629 | | | | 1,686 | | | | 45,315 | |
| MBOE | | | 69,286 | | | | 6,757 | | | | 76,043 | |
| | | | | | | | | | | | | |
| Estimated proved developed reserves: | | | | | | | | | | | | |
| Natural Gas (MMcf) | | | 119,313 | | | | 28,621 | | | | 147,934 | |
| Oil and Natural Gas Liquids (MBbls) | | | 35,788 | | | | 1,462 | | | | 37,250 | |
| MBOE | | | 55,673 | | | | 6,232 | | | | 61,905 | |
(a) Includes the non-controlling interest in the Encore reserves of approximately 53.3% at December 31, 2010.
(b) Includes Vanguard's, Encore's, Parker Creek’s and the Permian Basin Acquisition’s estimated net proved and proved developed oil, natural gas and natural gas liquids reserves as of December 31, 2010.
The standardized measure of discounted future net cash flows relating to the combined proved oil, natural gas and natural gas liquids reserves at December 31, 2010 is as follows (in thousands):
| | | Vanguard historical (a) | | | Permian Basin Acquisition | | | Vanguard pro forma combined (b) | |
| Future cash inflows | | $ | 3,670,000 | | | $ | 340,208 | | | $ | 4,010,208 | |
| Future production costs | | | (1,266,940 | ) | | | (139,964 | ) | | | (1,406,904 | ) |
| Future development costs | | | (156,714 | ) | | | (7,578 | ) | | | (164,292 | ) |
| Future net cash flows | | | 2,246,346 | | | | 192,666 | | | | 2,439,012 | |
| 10% annual discount for estimated timing of cash flows | | | (1,127,898 | ) | | | (109,945 | ) | | | (1,237,843 | ) |
| Standardized measure of discounted future net cash flows | | $ | 1,118,448 | | | $ | 82,721 | | | $ | 1,201,169 | |
(a) The standardized measure includes approximately $596.1 million attributable to the non-controlling interest of Encore.
(b) The pro forma standardized measure includes Vanguard, Encore, Parker Creek and the Permian Basin Acquisition.
For the December 31, 2010 calculations in the preceding table, estimated future cash inflows from estimated future production of proved reserves were computed using the average natural gas and oil price based upon the 12-month average price of $4.38 and $4.45 per MMBtu for natural gas for Vanguard historical and $79.40 and $79.43 per barrel of crude oil for Vanguard historical and Permian Basin Acquisition, respectively, adjusted for quality, transportation fees and a regional price differential.
The following are the principal sources of change in the combined standardized measure of discounted future net cash flows (in thousands):
| | | Vanguard historical (a) | | | Encore historical | | | Parker Creek Acquisition | | | Permian Basin Acquisition | | | Proforma Adjustments | | | Vanguard pro forma combined (b) | |
| Sales and transfers, net of production costs | | $ | (60,046 | ) | | $ | (125,869 | ) | | $ | (15,355 | ) | | $ | (11,738 | ) | | $ | – | | | $ | (213,008 | ) |
| Net changes in prices and production costs | | | 91,799 | | | | 206,058 | | | | – | | | | 22,433 | | | | – | | | | 320,290 | |
| Extensions discoveries and improved recovery, less related costs | | | 891 | | | | – | | | | – | | | | – | | | | – | | | | 891 | |
| Changes in estimated future development costs | | | (9,476 | ) | | | (10,818 | ) | | | – | | | | – | | | | – | | | | (20,294 | ) |
| Previously estimated development costs incurred during the period | | | 15,662 | | | | 2,264 | | | | – | | | | 11,808 | | | | – | | | | 29,734 | |
| Revision of previous quantity estimates | | | 16,728 | | | | 42,576 | | | | – | | | | 16,188 | | | | – | | | | 75,492 | |
| Accretion of discount | | | 17,867 | | | | 49,450 | | | | – | | | | 5,359 | | | | – | | | | 72,676 | |
| Purchases of reserves in place | | | 856,299 | | | | 619 | | | | – | | | | – | | | | (831,748 | ) | | | 25,170 | |
| Change in production rates, timing and other | | | 10,051 | | | | 36,797 | | | | 30,278 | | | | (14,923 | ) | | | – | | | | 62,203 | |
| Net change in standardized measure | | | 939,775 | | | | 201,077 | | | | 14,923 | | | | 29,127 | | | | (831,748 | ) | | | 353,154 | |
| Standardized measure, January 1, 2010 | | | 178,673 | | | | 494,501 | | | | 121,247 | | | | 53,594 | | | | | | | | 848,015 | |
| Standardized measure, December 31, 2010 | | $ | 1,118,448 | | | $ | 695,578 | | | $ | 136,170 | | | $ | 82,721 | | | $ | (831,748 | ) | | $ | 1,201,169 | |
(a) The standardized measure includes approximately $596.1 million attributable to the non-controlling interest of Encore.
(b) The pro forma standardized measure includes Vanguard, Encore, Parker Creek and the Permian Basin Acquisition.
